Research & Data

Texas Service Sector Outlook Survey

April 30, 2013

Texas Service Sector Activity Expands but at a Slower Pace

What's New This Month

For this month's survey, firms were asked supplemental questions on the impact of health care reform on employment and employee compensation plans. Read Special Questions.

Growth in Texas service sector activity slowed in April, according to business executives responding to the Texas Service Sector Outlook Survey. The revenue index, a key measure of state service sector conditions, remained positive but fell over 9 points to 6.1, its lowest reading in nine months.

Labor market indicators improved despite weaker revenue growth. The employment index edged up to 9.2 from 8.3, suggesting hiring continued at a similar pace as last month. The hours worked index rose 4 points to 7.1, its highest reading since May 2012.

Perceptions of broader economic conditions reflected less optimism in April. The general business activity index fell 6 points to 3.7. The company outlook index edged down to 4.1 from 6.2, with 20 percent of respondents reporting that their outlook improved from last month and 16 percent noting it worsened.

Price and wage pressures increased slightly in April. The selling prices index ticked up to 6.4 from 5.8, indicating prices increased at a similar pace as in March. The wages and benefits index moved up to 15.7 from 11.6, although the great majority of firms continued to note no change in compensation costs.

Respondents’ expectations regarding future business conditions reflected less optimism this month. The index of future general business activity moved down 8 points to 10.8, and the index of future company outlook fell 10 points to 11. Indexes of future service sector activity, such as future revenue and employment, fell slightly but remained in solid positive territory.

Texas Retail Outlook Survey

April 30, 2013

Retail Sales Fall

Retail Sales Fall

Retail sales declined in April, according to business executives responding to the Texas Retail Outlook Survey. The sales index plunged to -4.4 from 8.4, its first negative reading since July. Inventories rose.

Labor market indicators were mixed. The employment index dipped from 8.9 to 6.1, suggesting hiring continued but at a slower pace than in March. The hours worked index fell to -2.5, indicating shorter workweeks.

Retailers’ perceptions of broader economic conditions turned pessimistic in April. The general business activity index dropped dramatically from 7.4 to -7.4, its lowest reading since July. The company outlook index turned negative for the first time in nine months, falling from 7.6 to -0.8. Nineteen percent of respondents noted an improved company outlook over the prior month, compared with 20 percent who reported their outlook had worsened.

Retail price pressures were largely unchanged while wage pressures eased in April. The selling prices index held steady at 7.3, indicating prices increased at the same pace as in March. The wages and benefits index fell from 13.7 to 4.6, with the great majority of firms noting no change in labor costs.

Perceptions of future broader economic conditions were markedly less optimistic in April. The future general business activity index deteriorated almost 16 points to 11.3, while the index of future company outlook fell sharply from 23.3 to 8. Indexes of future retail sector activity also decreased but remained in solid positive territory in April.

The Texas Retail Outlook Survey (TROS) is a component of the TSSOS that uses information only from respondents in the retail and wholesale sectors.

The Dallas Fed conducts the Texas Service Sector Outlook Survey monthly to obtain a timely assessment of the state’s service sector activity. Data were collected April 16–24, and 240 Texas business executives responded to the survey. Firms are asked whether revenue, employment, prices, general business activity and other indicators increased, decreased or remained unchanged over the previous month.

Survey responses are used to calculate an index for each indicator. Each index is calculated by subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase. When the share of firms reporting an increase exceeds the share reporting a decrease, the index will be greater than zero, suggesting the indicator has increased over the prior month. If the share of firms reporting a decrease exceeds the share reporting an increase, the index will be below zero, suggesting the indicator has decreased over the prior month. An index will be zero when the number of firms reporting an increase is equal to the number of firms reporting a decrease. Data have been seasonally adjusted as necessary.

Next release: May 29, 2013

Texas Service Sector Outlook Survey

April 30, 2013

Click on links in the table for greater details. Historical data are available from January 2007 to the most current release month.

Business Indicators Relating to Facilities and Products in Texas
Current (versus previous month)

*Indicator direction refers to this month's index. If index is positive (negative), indicator is increasing (decreasing) or improving (worsening). If zero, indicator is unchanged.
**Number of months moving in current direction.
Data have been seasonally adjusted as necessary.

Texas Retail Outlook Survey

April 30, 2013

Click on links in the table for greater details. Historical data are available from January 2007 to the most current release month.

Business Indicators Relating to Facilities and Products in Texas, Retail
Current (versus previous month)

*Indicator direction refers to this month's index. If index is positive (negative), indicator is increasing (decreasing) or improving (worsening). If zero, indicator is unchanged.
**Number of months moving in current direction.
Data have been seasonally adjusted as necessary.

Texas Service Sector Outlook Survey

April 30, 2013

Texas Retail Outlook Survey

April 30, 2013

Texas Service Sector Outlook Survey

April 30, 2013

Comments from Survey Respondents

These comments are from respondents' completed surveys and have been edited for publication.

Rental and Leasing Services

The only reason we forecast good growth over next six months is because we are looking at a major acquisition of a bankrupt company. This company filing for bankruptcy is probably more indicative of the economy than the fact that we are growing through an acquisition. We are expanding because we want to pass our family-owned company on to the third generation.

Professional, Scientific, and Technical Services

The real estate industry has continued to improve throughout the first quarter of 2013, with the residential sector still leading the way. The increase in demand for houses coupled with a shortage of inventory has increased prices and the number of transactions closed over the first quarter of 2012. The commercial sector still seems to be recovering from the brisk fourth quarter of 2012, but new orders for commercial transactions have been increasing steadily during the month of April. Our outlook for the remainder of 2013 remains positive, but we are cautious about adding staff due to the state of our economy.

A serious concern for businesses is the federal government debt.

Taxes and health care costs are major concerns for us, while our clients face much uncertainty.

Employment will be up slightly due to a contingent of summer interns and a few full-time additions. We think the cost of doing business and our cost per employee will increase toward the end of the year as costs associated with the Affordable Care Act become clear. We have no faith in the numbers we have been hearing from the federal government. We are being extremely cautious about adding full-time employees.

We feel the economy remains somewhat stable but still erratic.

Management of Companies and Enterprises

Too much regulation is hurting us and our customers.

The increased cost of regulations has affected our business and ability to deliver products.

As a community bank, we have seen our interest income squeezed as net interest margins contract due to the low interest rate environment and the intense competition for loans as more banks try to grow their loan portfolios.

We feel that federal regulations are the single greatest obstacle for recovery.

Administrative and Support Services

We are seeing several months of reduced job openings and longer decision times for hiring.

We are introducing a new product that we expect will increase our market share.

Although we will continue to expand our services and products, the pressure to maintain competitive prices does not allow us to pass along all of our increased costs. This does put pressure on our margins and requires greater efficiency in producing sales. We expect this pressure to continue throughout 2013.

Ambulatory Health Care Services

We are located in the Permian Basin, and the oil production boom is at a high in this region. That does not impact health care providers but may have contributed to the increase in our labor costs. Health care providers are dealing with a continuous lowering of payments from Medicare, Medicaid and private insurance payers, who are tying payments to timely claim filing, quality assurance and outcomes. Overall, we believe health care reform is needed and will bring a high volume of first-time patients to health care providers who will have to manage this population at a much lower cost while dealing with increasing accountability for quality of service and patient outcomes.

We believe the local economy is faring well, but consumers are cautious. We do a significant amount of elective surgeries, and we expect at least a portion of those to be delayed. The sequester is affecting our Medicare payments, which will be 2 percent less. Another potential hit to the local economy is drought, with agriculture a very big portion of the Panhandle economy.

Hospitals

We have not had a raise in a few years and don't really look for one in the near future.

Nursing and Residential Care Facilities

Sequestration has reduced our Medicare revenue by 2 percent across the board. This is having a major impact on our revenues and services.

Our outlook is negative due to lower government reimbursement and continuing uncertainty about the impact of the late 2012 health care reform.

Accommodation

Weekend business is a little weaker than in prior months. We have a solid core of long-term employees who are good drivers of bringing in business. We are in a very competitive marketplace.

We remain a bit concerned about the third and fourth quarters of this year.

Food Services and Drinking Places

While we are indicating that everything remained the same in revenue, this is actually an improvement because we had been looking at declining sales since the first of the year. Our numbers definitely indicate that the economy is recovering from the shock of the payroll tax increase. We haven't made it back to the slightly positive numbers we had in the last part of 2012, but we are now at least even with last year again.

Insurance Carriers and Related Activities

We are seeing increasing payroll and sales figures in commercial insurance applications, especially from contracting risks.

Merchant Wholesalers, Durable Goods

We think a mild recession is coming between the end of 2012 and the first half of 2014. Our outlook is biased by that expectation. However, we will drive as much volume as possible through year-end until it starts falling off. Texas should be pretty mild, so we believe it will be better to stay aggressive all the way through the dip.

There are extreme dry weather conditions in agriculture markets.

This is our first negative report about the next six months. We are seeing a noticeable caution about the economy this month; one of our better customers reports that while they've been awarded jobs, more of these projects are being held indefinitely, like they had first experienced a few years ago. The more they learn about the new health care law, the more they are concerned about their costs and the economy. They believe their contractor and developer customers are starting to get nervous, and we agree.

Merchant Wholesalers, Nondurable Goods

We are still experiencing an incredibly tepid demand cycle. An influx of low-cost imported products is now creeping into our marketplace, at a pace we have not seen before. We may have to switch more of our business to lower-cost imported products to continue to compete.

Motor Vehicle and Parts Dealers

Our problems are related to our franchisor, not the market, which is up.

Building Material and Garden Equipment Supplies Dealers

Business is better, but the underlying current is still uncertainty. It seems that pent-up demand took over for now.

Nonstore Retailers

We are anticipating sales growth primarily due to adding a new line of business. We expect our core original lines of business to remain flat. We are increasing our pricing on original lines of business to maintain margins in the face of price increases from our suppliers. In vending, it takes time to raise prices on thousands of machines; thus, we attempt to get ahead of expected price increases.

Texas Service Sector Outlook Survey

Historical Data

Historical data can be downloaded dating back to January 2007.

Indexes

Download indexes for all indicators. For the definitions of all variables, see Data Definitions.

Texas Service Sector Outlook Survey

Texas Retail Outlook Survey

Unadjusted

Unadjusted

Seasonally adjusted

Seasonally adjusted

All Data

Download indexes and components of the indexes (percentage of respondents reporting increase, decrease, or no change). For the definitions of all variables, see Data Definitions.

Texas Service Sector Outlook Survey

Texas Retail Outlook Survey

Unadjusted

Unadjusted

Seasonally adjusted

Seasonally adjusted

Questions regarding the Texas Service Sector Outlook Survey can be addressed to Amy Jordan at amy.jordan@dal.frb.org.

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